Buy vs Build your Software Licensing?

Make the correct decision to meet your needs and ongoing strategies

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Enterprise-Class Software Licensing

Your decision to Buy or Build

When it comes down to deciding between developing your own internal licensing solution and finding a partner, you should consider these key areas:

Yes, it is tempting when you have in-house technical expertise to think it is logical to build your own licensing solution. You will recognize that this thinking often comes from those in the team who primarily consider it a technical challenge, and lets face it, technical minded people love to build things.

Stop..! Before you jump into building your own software licensing platform, do a deep discovery on the cost, time, risk and effort vs. using a modern, battle tested, future proof, fully supported and ready-to-go solution. Why build something that's not a core competency nor drives revenues?

Read our detailed blog post on buy vs build >>

"For any large software company that prizes the value of what they are making, Nalpeiron is the best way of ensuring the security of their software – and for a large company, that’s really important. We’ve come a long way from our dongle days. With Nalpeiron, we can finally stop stressing over licensing issues and focus on what we do best: building great software"

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David O’Neal, Product Line Director at New River Kinematics

In licensing, building something effective requires a huge amount of forward planning. Even when you get there and release your new licensing creation out into the wild it is far from over. In fact, it is just the beginning. A self-build is another system that needs supporting, and will need the support of those that have created it. So not only will you need infrastructure in place, all your support is internal. You also won’t even know what the problems will be until the system is live, that is the reality.

This is where the build vs buy tips heavily in favor of buy.

A dedicated, battle tested, highly advanced solution like Zentitle comes with the peace of mind of a truly responsive support team that’s at hand for you. Even better, you cash in on the fact that so many potential issues are headed off long before they can ever hit you. This is because Nalpeiron live and breathe licensing. It’s all they do, and with 100s of ISVs and millions of end-users across multiple platforms and all sorts of configurations, it is battle tested to the extreme.

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According to Nalpeiron customers, when over 500 were surveyed, these issues were the key reasons for moving away from another vendor or away from homegrown licensing.

Improve your speed to market:
In today's rapidly moving Software market, being able to release and ship products quickly and without delays to the set project schedules are critical. We all know hitting the ship date is a real challenge.

Out sourcing non-core functions like Licensing can help decouple this critical functionality from the Software development process internally, preventing issues with delays from other parts of the business. In addition, if you choose a partner who offers a solution that is easy to integrate and fast to implement with your own programming efforts, you can ship with a few extra days of engineering time rather than months with in-house teams or more cumbersome technologies.

As well as making it easy to implement, you need something that works out of the box and that uses standards to allow you to connect all your internal systems quickly too so that operations don't slow down your delivery dates. Finally, setting up the entire supporting infrastructure and training on it can take months with issues around servers, bandwidth, SLAs, databases and all the required connectivity. A hosted solution can eliminate all of these issues and allow you to simply skip three to four months of delays to your project.

Flexibility:
By far the most popular reason to switch out home-grown licensing is to provide the business with far more flexibility in offering its customers new business models, ways to buy and to make these changes fast and easy into the future.

Nalpeiron will allow you to instrument your business to offer both older style and completely modern business models, along with the capability to analyze and change over time based on the market requirements and competitive threats.

Reduce the business risk:
Licensing is integral to the success of your Software business and therefore getting the right supplier to support your long term objectives is critical to reducing risk to your business.

Nalpeiron offers you the safety of an external supplier whose sole focus is on producing licensing solutions that offer you and your users 24x7 service. We are the experts in the complex mix of technology, encryption, servers and platforms that allows us to take care of your needs allowing you to focus on your core business. For years Nalpeiron has improved and refined its platform - a capability that is far superior to even the largest ISV.

Counting the costs:
Costs of in-house solutions are often hidden and not considered as part of the vendor selection process.

The trap many ISVs have fallen into when considering the costs of build vs. buy is to simply underestimate the complexity or sophistication required to offer the business what it really needs to compete in the market today.

Oftentimes licensing projects appear much cheaper to build in-house but get abandoned later due to the mounting costs of not only the build but maintenance phases, these run into $100Ks even for a simple project and can take years - today in that time a business can easily fail or a new business models can emerge) as well as constant modification of the solution to meet changing market dynamics (e.g. new licensing and distribution models) and piracy threats. The end result is higher initial costs and ongoing maintenance expenses plus the inherent risks of experience engineering team turnover without adequate knowledge transfer.

These sophisticated modern requirements mean a much more complex solution than previously associated with software licensing. They extend the scope of the project to build in expected future requirements such as new platform and business model support (think SaaS and subscription).

Cost examples for planning:
- The opportunity cost of the time, effort, and ongoing costs of building a solution vs. focus on core competency
- Up-front planning to make sure that the solution developed will meet the organization's needs now and, in the future
- Initial development requiring years of development resources to create a robust, comprehensive solution
- Ongoing dedication of a minimum two engineers to maintain and update the system and respond to market changes
- Infrastructure, license fees, and operating costs plus a DevOps team
- The cost of building and managing integrations with a lot of internal systems like ERP and CRM plus user-facing portals
- Continually monitoring, analyzing and creating solutions to meet emerging security needs
- Losses vs the competition due to the lack of agility, speed , and innovation vs building a “built for purpose” solution
- Loss of revenues due to overuse, VM cloning, and general misuse of entitlements that need specialist knowledge to block
- Loss of revenues due to lack of specialist tools to help sales upsell and exploit usage analytics to convert overuse to new $$

ROI Analysis – A TCO Comparison:
A “total cost of ownership” analysis helps an organization understand and manage the inter-related direct and indirect costs of managing and licensing their software Assets.

A thorough analysis considers direct costs, such as software licenses, maintenance, and required hardware or hyperscaler costs, and indirect costs, such as software asset management, desktop administration, DevOps, and end-user support. Plus, the most often overlooked costs of ongoing development and maintenance of specialized infrastructure, integrations, and OS support . In addition, many "soft" costs need to be factored in when considering the TCO, such as revenue recovery from piracy or overuse, competitive agility issues, and speed to market, along with simple opportunity costs from developing in-house licensing vs. outsourcing.

To compare the TCO of In-house development with Zentitle2™, there are four main expense areas and additional strategic costs to be considered:
• Development Expenses
• Operating Expenses
• User Management Expenses
• Other "soft" costs

Other forms of Costs:

Opportunity costs
These can be very large indeed, but very hard to easily calculate. Indeed, these are really about strategic thinking behind focusing on core competency and growing that way rather being a "jack of all trades". There are some easy to show hard costs like engineers dedicated to the licensing but this category should also include how well you could do if you avoided non-core activity that slows down the rest of the team and is a diversion from your own innovation efforts.

Speed to market costs
This breaks into several areas; one is the time it takes for your own team or an outsourced one to respond to your initial requirements and then any changes in market needs. When considering outsourcing you need to consider the on-premise vs. hosted models as relates to speed along with the initial setup times - these vary wildly and increase PS costs significantly. For your internal development there is not only the fact you are likely to have limited resources to make changes, they can also slow down the business as you wait for licensing work to complete - a big downside to competitiveness.

Piracy and security costs
These relate to your markets and customers and could be very high if you are working with the consumer/international or very low if you are mainly US enterprise focused. A look at the audience will help judge this but in general outsourced vendors have far better technology for protection and show anywhere up to 10% revenue gains if piracy is an issue.set that may not be readily available within every software vendor's development team.

Acquiring these skills in-house - either through supplementary training or recruitment - can be extremely costly. All of the above doesn't include all the other costs of infrastructure, 3rd party software, training and more. Before embarking on - or continuing - an in-house license management system, you should look beyond the startup development costs to the overall TCO inherent in a comprehensive solution.

Learn from the mistakes of those who have home built

"We reached out to Nalpeiron because we wanted to move away from our proprietary licensing, which we’d been using for years, and to switch to truly modern technology. After discussing our licensing requirements with Nalpeiron, it became evident that we’d found a provider who would work with us on our monetization strategy"

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Philippe Fontan, Technical Product Manager, Objectif Lune

A homegrown licensing solution is never ‘done’. To think of a self-built licensing solution as “forge, fit and forget” would be a mistake.

A truly elegant Licensing System on the face of it will seem relatively simple from a concept point of view, but the execution of it branches out into a wide and deep array of considerations. Your choice of Licensing System is incredibly important, because as a software company ensuring your entitlements are delivered and met is nothing short of mission critical.

When one of your 1000s or 1,000,000s of customers can’t use the very software they have paid to use, tempers and patience run out very quickly indeed. So, you need a highly skilled, deeply knowledgeable and highly reactive support team for your licensing system, that your customers and your own customer service department can rely on.

"Cloud licensing gives us a lot of additional security and a lot more control than anything else we’ve ever had. You just sell it, put it out there and it can be used in any way, shape, or form – even at sites that have no Internet connectivity. Now that we have seen the advantages of the cloud-based approach, we could never go back"

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David O’Neal, Product Line Director at New River Kinematics

How easy is it move to Zentitle2?

"Our engineers were amazed at how easy it was to implement and we had something up and running in a day. We were impressed"

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David O’Neal, Product Line Director at New River Kinematics

Questions regarding ease of migration are often a main area of interest for customers.

As Zentitle customers have found, it is quite straightforward to replace and existing solution with Zentitle.

Zentitle is armed with a superset of licensing models that the competition offer, has excellent and extensive documentation, as well as sample code, tutorials and videos, all to help you get migrated efficiently.

A quote from IDC:

"A software publisher's understanding of its core competencies with regards to building and maintaining a licensing technology platform is often a key driver in the build versus buy decision. Some publishers may believe that since the company's core business is developing software, this capability can and should be extended to software-based licensing technologies. Executives at other publishers may come to the conclusion that although developing software is a core competency, developing and maintaining a platform of licensing technologies is not."

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IDC

Summary: Buy vs. build

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